S&P 500 slightly lower with stimulus, virus in focus. The S&P 500 Index is slightly lower early today as market participants continue to assess stimulus progress, COVID-19 case growth, and earnings. The S&P 500 climbed 0.7% Monday as Republicans prepared to present their version of the next stimulus bill, while COVID-19 case growth appeared to be leveling off. Most major Asian indexes were higher overnight, helped by a weaker dollar. Most major European indexes are down slightly at midday.
Expect Congress to coalesce around a COVID-19 relief bill. Republicans and Democrats currently remain far apart on the potential $1.5 trillion COVID-19 stimulus bill, particularly with regard to aid for state and local governments. We expect the Republican proposal to move closer to that of the Democrats to get a deal done that could potentially bring total US fiscal stimulus to fight COVID-19 to over $4 trillion, or about 17% of US gross domestic product (GDP). The political pressure is high to get a package completed before the August recess in less than two weeks.
More high-frequency data pointing to a pause. After carving out the first part of a “V-shaped” recovery, the US economy has leveled off somewhat in response to the latest wave of COVID-19. In this week’s Weekly Market Commentary: Stalling Economic Recovery May Slow Stock Market Rally, we highlight evidence of a pause. We look at a few more indicators telling the same story today on the LPL Research blog.
COVID-19 news. Positive trends continued as new cases dropped 8.3% Monday week over week, even as tests rose 7%. The seven-day average case count fell for the second straight day for the first time since June 6–7 (source: Johns Hopkins). National hospitalization counts continued to fall over the past week. Case trends in California, Florida, and Texas continued to improve. Pfizer and BioNTech announced they would begin later-stage trials for their top vaccine candidate, with the goal of submitting it for regulatory review in October.
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